We anticipate even greater expansion from these retailers once the housing market shows signs of heating up. To this point in the cycle, new for-sale home starts have been limited. There has been a ramp up in multifamily rental construction, which is where much of the demand from population growth is going into.

GlobeSt.com: Vacancy declined 20 basis points to 10.4 percent in the third quarter. Retail vacancy in Greater Phoenix is now 70 basis points lower than one year ago and 200 basis points lower than it was 24 months ago. What are the factors at play here?

Woods: The local retail market has been strengthening at a gradual pace over the past few years, and the latest results are a continuation of the longer-term trend. The retail recovery started with leasing by dollar stores and other discounters such as Goodwill. Then came a surge in activity from businesses that could not be replaced by the Internet—restaurants and bars, and several gyms that took spaces ranging from 15,000-45,000 square feet.

In the current phase, more traditional tenant growth is under way, and there is a more diverse mix of businesses that are looking to expand. This is slowly driving the local vacancy rate lower, as demand picks up. On the supply side, construction has been limited to a few build-to-suit locations.

GlobeSt.com: After sales of shopping centers slowed in the second quarter, activity spiked in the third quarter. This surge in activity and improving fundamentals are supporting rising property prices. The median sales price of $111 per square foot is up more than 30% from the median price in 2013. Can you expand a little on the fundamentals of the retail/shopping center market?

Woods: Property fundamentals are stabilizing. Vacancies are tightening somewhat, rents are leveling off or increasing in some locations and the business climate is improving. As a result, property financials are stronger, supporting valuations when buildings are being evaluated for sale.

Another factor driving overall prices higher is the declining influence of distressed assets on the overall market. From 2010 to last year, approximately half of the multi-tenant properties that sold were in some form of distress, and these buildings often sold at deeply discounted prices. Thus far in 2014, there has been a change in the mix of building sales, and performing assets are making up a greater share of the overall transactions. With fewer properties trading on a “price-per-pound” basis, overall prices have pushed higher.

GlobeSt.com: What do you see moving forward into the fourth quarter?

Woods: The fourth quarter is usually a strong one for the retail market as businesses typically expand in anticipation of the holiday shopping season. A few new projects are scheduled for delivery, including a 60,000-square foot expansion of the Tanger Outlet Mall in Glendale as well as the first phase of the redevelopment of the former Sundome Center for the Performing Arts in Sun City West.

The mix of expanding tenants and the delivery of fully occupied new product will drive metrowide vacancy rates lower. Vacancy is expected to end 2014 at approximately 10 percent, or roughly 100 basis points lower than at year-end 2013.

Economic and employment growth are the wild cards. These drivers have shown signs of life in recent months, but there have been a number of “false starts” in the economy in recent years. If recent growth patterns can be sustained going forward, we could see a more dynamic year of retailer expansion in 2015.